Sales have increased at automakers such as General Motors Co., while demand for machinery and equipment is prompting manufacturers such as United Technologies Corp. to raise forecasts. An improvement in overseas markets also will further underpin the outlook for U.S. factories.

“It’s a sign the broader economy is doing well,” Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois, said before the report. “Consumers have more purchasing power to buy goods such as appliances,” and “business spending on equipment should accelerate.”

The gain in the factory index was broad-based, with 17 of 18 industries reporting growth in April. Index estimates from 84 economists in the Bloomberg survey ranged from 53 to 56.2. Manufacturing accounts for about 12 percent of the economy.

Another report showed consumer spending surged in March by the most in almost five years as warmer weather brought shoppers back to auto dealerships and malls, a sign the economy gained momentum heading into the second quarter.

Consumer Spending

Household purchases, which account for about 70 percent of the economy, climbed 0.9 percent, the most since August 2009, after a 0.5 percent gain in February that was larger than previously estimated, Commerce Department figures showed. Incomes increased by the most in seven months.

Stocks fell after three days of gains. The Standard & Poor’s 500 Index declined 0.2 percent to 1,880.67 at 10:28 a.m. in New York.

The ISM’s group’s factory employment gauge increased to a four-month high of 54.7 in April from 51.1.

“It’s a very good sign,” Bradley Holcomb, chairman of the purchasing managers’ group, said on a conference call with reporters. “We’re setting up a good trend. There’s a lot of production ahead of us that requires this additional employment.”

The index of production was little changed at 55.7 after 55.9 the prior month, while the new orders measure held at 55.1. The gauge of export demand climbed to a five-month high of 57 from 55.5.

Order Backlogs

The measure of orders waiting to be filled eased to 55.5 from 57.5. The inventory index rose to 53 from 52.5, while a gauge of customer stockpiles was unchanged at 42. A figure higher than 50 means manufacturers are building stockpiles.

Other factory reports today showed manufacturing in China grew less than projected in April, while in the U.K., it expanded more than forecast.

One area of the U.S. economy that remains a bright spot is motor vehicle demand. Cars and light trucks sold at a 16.3 million annualized rate in March that was the fastest since May 2007, according to data from Ward’s Automotive Group. GM today said its April sales increased 6.9 percent from a year earlier, exceeding analysts’ estimates of a 5.7 percent gain.

Other reports signal further gains in manufacturing. Commerce Department data showed bookings for goods meant to last at least three years increased in March by 2.6 percent, the biggest gain since November, after rising 2.2 percent in the prior month.

United Technologies

United Technologies, the maker of Pratt & Whitney jet engines and Otis elevators, last month raised the lower end of its 2014 earnings forecast after beating analysts’ first-quarter profit estimates.

“We’re feeling pretty good about the economies,” Greg Hayes, chief financial officer of the Hartford, Connecticut- based company, said in an April 22 telephone interview. “Europe seems to be coming out of the doldrums and the U.S. is performing about as expected.”

Parker Hannifin Corp. this week boosted its forecast for earnings, adjusted for restructuring expenses. The maker of gears, pumps and valves cited “positive order trends.”

The improvement comes as Federal Reserve policy makers yesterday decided to trim the pace of bond purchases as they looked beyond the first-quarter growth slowdown. The committee pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.

“Growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions,” the Federal Open Market Committee said in a statement following a meeting in Washington. “Household spending appears to be rising more quickly.”